Saturday, 19 May 2012

ASX 200 looks set to test the trend line drawn from the 2009 and 2011 lows

First chart sets the scene. The ASX 200 is in a bear market. It closed ASX trade on Friday at 4046, and was barely changed at the close of after hours trade, at 4048.

The next chart zooms in to the action since the 2007 high, and shows that the ASX 200 looks to be headed for a test of the trend line drawn from the 2009 and 2011 lows. Thanks to DFM for pointing this out in in his Trading Week wrap at MB earlier today. A break below the line would confirm the beginning of the next downward leg of the bear market, and suggest an initial speed bump target at the mid-channel line below 3400, and an ultimate trend channel target of low 2000s.

S&P 500 looks set for a big decline unless it can rally back over 1360

The first chart shows my big picture roadmap for the S&P 500. The market has touched and respected the nearby trend line many times since 2000, and not coincidentally it runs parallel to the trend line joining the 2002 and 2009 lows. While the market remains below the line (about 1360) I expect it to trend lower, in a  decline of similar ferocity to those that began in 2000 and 2007.

The next chart zooms in to the action since the beginning of 2011. It will be interesting to see if the lower boundary of the resistance zone around the 2011 highs is re-tested. The 1360 level is bang in the middle of the zone. Only a rally through that 1360 level, or thereabouts, would call in to question the bearish case.

DAX closes the week below two recent trend channels

The first chart shows the big picture view, from 2007's top to the present day. This is a market that can fall hard when trend lines are broken.

The next chart shows the DAX closing the week's after hours trade below two recent trend channels. The lower line of the large trend channel equates to the lower trend line on the big picture chart.

AUD/USD continues to trend lower

It will be interesting to see if the lower trend channel line keeps a lid on price. If so, I will continue to favour that we are in wave 3 of an eventual 5 wave move lower toward the low 90s. Certainly last week's low is important, as the lengths of 3 = 1, or C = A if you are looking for a 3 wave correction. A break lower through equality would favour a move toward 3 = 1.618 * 1. Also to my eyes it would diminish the odds that the current move is a corrective C leg.

EUR/USD continues to trend down

I have removed the Head and Shoulders labelling that I had been showing for some time, as the target was as good as met last week. So that pattern is now history. What is next? I expect the next big move to be flagged by either a move lower through the January low, or by a move higher through the upper trend channel line.

Gold continues to trend down

Maybe Gold has put in a significant bottom. Maybe it hasn't. The near term and medium term trends are still down.

Silver continues to trend down